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MARK (not his real name), decided to transfer his investments in equities to a High Yielding Investment Program (HYIP) program he saw online. Having been frustrated with the performance of his portfolio for the past year, Mark was determined to make up for the opportunity losses in this high-risk, high-reward investment. At two percent guaranteed interest a day, there is nothing to think about. Lo and behold, the day after he put in his fund, the website was gone, along with his $1,000.
Fortunately for Mark, the money was only a fraction of what he has. Nevertheless, he felt crushed.
“Greed got the better of me,” he confessed. But it was more about losing this early that frustrated him. He is not the only one. HYIPs are growing in popularity because of its, well, high yields. Investors have tried their lucks with this program. Some have won, others have lost. And no matter how much it is sugar-coated and disguised, the fact remains the same: HYIPs are risky, and not for the faint of heart.
HYIP is a scheme that promises unsustainable high returns that ordinary investments won’t be able to match. There are no underlying assets as what these companies claim, and often times, they use broad financial jargons to lure investors.
I still remember back in 2007, two HYIPs were creating so much buzz in the community. These were FrancSwiss and Performance Investments Products Corp. (PIPC). Despite that bullish run of the local equities up to that point, many Filipinos still saw the opportunities these two offered. The former offers a guaranteed 4.5-percent interest a day, while the latter offers only 12 to 14 percent per annum. In an online forum, investors were defending these two companies at the out set. It didn’t take long for their sentiments to reverse. FrancSwiss and PIPC folded up within months from each other.
Investing in HYIPs is different now. Before, you have an agent brokering these investments. I was personally once presented with one. Now, those who have the appetite (and the money) can now just go online and search from the hundreds and hundreds of HYIPs being offered all over the world.
Mark, now a veteran of HYIPs, advises the following so that those who can’t resist the temptation to dip their hands into these investment programs would learn from his mistakes.
“Your readers should understand what they’re getting into,” Mark explains. He lost money and he wouldn’t others to experience what he did. “Although they off-the-charts in terms of risk, there is no reason why you cannot mitigate that” he further adds. After All, wiser is the man who learns from, others’ folly.
Make interest work for you. After making a profit, Mark suggests withdrawing the capital already, and play only with the earnings. That will be less risky. In case the site folds up, you don’t suffer the devastation of losing your money.
Avoid short term HYIPs for the new investors. Investors should watch out for HYIPs that last only one to 60 days. As if HYIPs are not risky enough, these short term programs can make you lose capital as quick as a day. Mark further advises to scratch HYIPs that offer 200 percent in one day. It happened to Mark, it could happen to you as well.
Check for security of the websites. These websites contain your money, and these websites should go out of their way in terms of security. As a general rule, an SSL Protection is the first thing you should check. The green padlock we see beside the URL means it is secure. For further protection, HYIPs should also have their own DDoS proection. Mark advises for websites not using DDos, do more research before diving in.
Do not click on scam mails. Once you start registering in HYIPs site, scam emails will definitely flood your inbox. Never ever click on any links from these emails. The emails looks legitimate, and can fool anyone but Mark shares this tip: if it addresses you as Dear Customer, and not as your name, then the site is out to get your money. And once you clicked on this link, then your account will immediately get hacked, making you lose all your money.
Look for websites that offers four payment processors. If a site has all four payment processors, it’s a good sign its going to last longer. If it only offers two, don’t bother with it. Chances are, it’s going to close shop sooner that you would want it to.
For the record, Mark also has a diversity of investments including pooled funds, retail treasuries, life insurance and pension plans, and SDA. Mark confessed he needed that adrenaline rush that is why he ventured into this kind of investment. This is his play money. If he loses the whole thing, his lifestyle won’t be affected, not even a bit.
In investing, we have a long standing adage: invest only the money you can afford to lose.
Kendrick Chua is a Registered Financial Planner of RFP Philippines. To learn more about personal financial planning, join the Batch 29 RFP program on October 13 to December 8 at Crowne Plaza Galleria. To get more details, e-mail firstname.lastname@example.org or visit www.rfp.ph.